India Notifies CAFE-III Fuel Efficiency Norms For 2027-2032
India has officially notified its third phase of Corporate Average Fuel Economy (CAFE-III) regulations, enforcing stricter fleet-wide fuel efficiency standards across passenger vehicle manufacturers from April 1, 2027, through March 31, 2032. The framework, notified by the Ministry of Power, shifts regulatory compliance entirely to portfolio-wide performance calculations for M1 category passenger vehicles rather than evaluating individual models on a standalone basis.
According to Autocar India, for Passenger vehicle retail pricing, The flattening weight-adjustment curve under CAFE-III reduces the emission allowance granted to heavier vehicles, increasing compliance costs and retail price pressure on large internal-combustion SUVs. According to The Indian Express, section 26 of the amended Energy Conservation Act mandates per-vehicle penalties of Rs 25,000 to Rs 50,000 for automakers failing to meet CAFE fuel-efficiency standards, plus a base penalty of Rs 10 lakh.
According to Autocar India, for CAFE-III implementation framework, MoRTH is empowered to enforce testing and conformity of production for CAFE-III, while the MIDC-to-WLTP target conversion factor will be notified separately by the Power Ministry and BEE. According to The Hindu, india's regulatory fleet reference mass grew by 13.6 percent from 1,082 kg in CAFE-II to 1,229 kg in CAFE-III, reflecting vehicle weight increases caused by mandatory safety gear and the surge in SUV sales.
The newly established regime removes a previously contemplated special regulatory concession for small petrol cars weighing under 909 kilograms while restructuring the baseline mass formula. Under the final rules, fleet targets are determined annually using a reference unladen weight set at 1,229 kg combined with tightening multipliers that progressively reduce permitted fuel consumption over the five-year implementation window.
Portfolio Formula And Yearly Target Progression
The annual average fuel consumption standard is calculated through a structured formula where a manufacturer's permitted threshold depends on its fleet-wide weighted average unladen mass. The baseline fuel-consumption target, denoted as 'c', and the weight-adjustment multiplier, denoted as 'a', decrease annually to drive continuous fleet efficiency improvements.
For the initial fiscal year 2027-28, the formula applies an 'a' value of 0.00158 and a 'c' value of 3.9960 litres per 100 kilometres, translating to approximately 94.8 grams of CO2 per kilometre for a reference fleet weight of 1,229 kg. By fiscal year 2031-32, these figures tighten to 0.00131 and 3.3273 litres per 100 km respectively, lowering permitted tailpipe emissions to around 78.9 g/km.
Powertrain Incentives And EV Super Credits
Battery electric vehicles and range-extended electric vehicles secure the most substantial advantages within the regulatory structure. Both powertrains receive a volume derogation factor of 3.0, allowing each qualifying unit to count three times its actual sales volume when computing the manufacturer's fleet-average performance.
Plug-in hybrid electric vehicles and strong hybrids running on flex fuel receive a factor of 2.5, while conventional strong hybrids obtain 1.6 and flex-fuel ethanol models gain 1.1. In addition to volume multipliers, alternative fuels benefit from Carbon Neutrality Factors that discount tailpipe emissions calculations by 8 per cent for E20 and higher petrol blends, and 22.3 per cent for dedicated flex-fuel ethanol vehicles.
Credit Trading And Compliance Flexibility Mechanisms
Manufacturers maintain compliance records through a structured passbook that logs annual credits and debits based on portfolio performance against assigned targets. The five-year regulatory timeline is divided into two discrete compliance blocks spanning FY2028-FY2030 and FY2031-FY2032, allowing entities to carry forward surplus credits within each block.
Automakers can trade surplus credits mutually or purchase deficit offsets directly from the Bureau of Energy Efficiency during a designated 30-day trading window held every October. Bureau buyout prices escalate annually from Rs 2,500 per gram of CO2 per km in FY2028 to Rs 4,500 per kg in FY2032, increasing financial incentives for underlying fleet decarbonisation.
Technology Credits And Testing Protocols
Carmakers can claim supplementary efficiency credits of 1 gram of CO2 per km for each specified green technology adopted, subject to an aggregate cap of 9 g CO2/km. Eligible technologies comprise start-stop systems, regenerative braking, tyre-pressure monitoring, transmissions featuring six or more speeds, efficient alternators, solar-reflective paints, advanced glazing, and high-efficiency air-conditioning systems.
From April 2027, manufacturers must report model performance under both the existing Modified Indian Driving Cycle and the Worldwide Harmonised Light Vehicles Test Procedure. Small-volume manufacturers producing or importing fewer than 1,000 eligible vehicles annually remain exempt from meeting specific fleet targets, though they must continue reporting consumption data.